Local sightholder Rand Diamonds, a subsidiary of US jewellery retailer Tiffany & Co., says despite the dire impact of the global economic downturn, it will go ahead with its plans of expanding its operations in Botswana as initially planned.
Infact, according to Tiffany's Vice President James Fernandez who was in Botswana last week, Rand Diamonds is going ahead with building its close to US$5 million (P35 million) factory adjacent to Diamond Trading Company (DTC) Botswana in Gaborone. Rand Diamonds, which is the only diamond cutting and polishing company with a Motswana shareholder, plans to complete the plant by March 2011.According to businessman McLean Letshwiti, who owns a 25-percent stake in Rand Diamonds, unlike other sightholders who responded to falling demand and income by retrenching, his company had not done so."We have not retrenched like the others, and we going ahead with all our original plans," Letshwiti, who is also Board Chairman of Rand Diamonds, said.
These assurances come against the backdrop of the Tiffany Group's worldwide net sales decline by 18 percent because of a slowdown in consumer spending, especially in the US - its biggest market - in the first quarter of 2009.
"The current economy is not good, but we will get through it," Fernandez, who is also the Chief Financial Officer of the oldest jewellery retailer in the US, said in a recent interview."Our sales are down, but liquidity is not an issue for the group because we are still a profitable company," he said.
Fernandez was in Botswana to attend a Rand Diamonds board meeting last Tuesday. He was accompanied by the group's VP responsible for Diamonds and Gemstones Andrew Hart, and Mark Hana, the VP for the group's subsidiary Laurelton Diamonds.
Tiffany's, which deals only in premier brands, says despite the slowdown in consumer spending, it is not going to sacrifice its brand reputation by lowering costs."We are a premium jeweller, so we are not as sensitive to cost production as other jewellers," he said.He added that they did not retrench their staff at Rand Diamonds because Tiffany directly buys what the company cuts and polishes according
Besides De Beers through DTC, Tiffany's also sources rough from miners such as BHP Billiton, Rio Tinto and Alrosa. Tiffany's, which was formed in 1887, has close to three billion in sales annually with 200 retailers in 21 countries.
But the group started to cut and polish diamond jewellery in 2000 and now has operations in Gaborone, Anterwep, South Africa, Namibia, India, China and Vietnam. It will soon open a new one in Mauritius.Diamond jewellery is the group's single most important product in retail sales.
However, due to the global economic crisis, the luxury jewellery industry and the diamond market are facing tough times, and Tiffany's has been no exception.Fernadenz said the US "remains pretty soft" but he is optimistic because Europe and Asia are beginning to show signs of recovery.
"After the steep price declines we saw in the last quarter of 2008, things seems to have levelled," he said. "At least they are not getting worse, so we will have to wait and see what happens."After this crisis, they foresee tremendous opportunities because the Chinese market is still at an infancy stage, especially in diamond jewellery, Fernandez said.
Industry analysts say with a scenario of demand outstripping supply in sight and no new large diamond deposits being discovered, the boom times that were last seen in the past five years will return.
"Demand worldwide will eventually pick up, and we could see an increase outpacing GDP growth," said one analyst.
Through its corporate social responsibility programme, Rand Diamonds says it has already contributed $2.5 million (P17 million) towards the building of an HIV/AIDS clinic at Princess Marina Hospital and towards the digging of boreholes in remote areas of Botswana through the Kalahari Conservation Society (KCS).